Ecological economics

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Ecological economics is a transdisciplinary field of academic research that addresses the dynamic and spatial interdependence between human economies and natural ecosystems. Its main focus is the "scale" conundrum: how to operate an economy within the ecological constraints of the biosphere. Ecological economics brings together and connects different disciplines, within the natural and social sciences but especially between these broad areas.

Contents

[edit] Overview

As the name suggests, some of the researchers in this field have a background in economics some in ecology and a few both, although the field has also attracted a much broader range of researchers concerned about environmental problems and human interaction with the non-human world. An important motivation for the emergence of ecological economics has been criticism of the assumptions and approaches of traditional (mainstream) environmental and resource economics. Ecological economics presents a more pluralistic approach to the study of environmental problems and policy solutions, characterized by systems perspectives, adequate physical and biological contexts, and a focus on long-term environmental sustainability. Ecological economics might be regarded as a version of environmental science or human geography with much emphasis on social, political, economic, behavioral and ethical issues.

Various competing schools of thought exist in the field. Some are close to resource and environmental economics while others are far more heterodox in outlook. An example of the later is the European Society for Ecological Economics. An example of the former is the Swedish Beijer International Institute of Ecological Economics.

[edit] History and Development

The first book with the title Ecological Economics was published in Europe by Juan Martinez-Alier (Blackwell, Oxford, 1987) tracing the history of ecological critiques of economics since the 1880s to the 1950s. European conceptual founders include Nicholas Georgescu-Roegen, William Kapp (1944) and Karl Polanyi (1950).[1] [2] Furthermore, some key concepts of what is now ecological economics are evident in the writings of E.F. Schumacher, whose book Small Is Beautiful – A Study of Economics as if People Mattered (1973) was published just a few years before the first edition of Herman Daly's comprehensive and persuasive Steady-State Economics (1977).[3][4]

The antecedents can be traced back to the Romantics of the 1800s as well as some Enlightenment] political economists of that era. Concerns over population were expressed by Thomas Malthus, while John Stuart Mill hypothesized that the "stationary state" of an economy might be something that could be considered desirable, anticipating later insights of modern ecological economists, without having had their experience of the social and ecological costs of the dramatic post-World War II industrial expansion. As Martinez-Alier explores in his book the debate on energy in economic systems can also be traced into the 1800s e.g. Nobel prize-winning chemist, Frederick Soddy (1877-1956).

In North America, conceptual founders include economists Kenneth Boulding and Herman Daly, ecologists C.S. Holling, H.T. Odum and Robert Costanza, biologist Gretchen Daily and physicist Robert Ayres. Daly and Costanza were part of the institutional founding of the field - resulting in the establishment of the academic journal Ecological Economics and the International Society for Ecological Economics (ISEE). Some attribute origination of ecological economics as a specific field per se to professor Herman Daly, University of Maryland, a former economist at the World Bank. Ecological economics has been popularized by ecologist and University of Vermont Professor Robert Costanza. CUNY geography professor David Harvey explicitly added ecological concerns to political economic literature. This parallel development in political economy has been continued by analysts such as sociologist John Bellamy Foster.

The Romanian economist Nicholas Georgescu-Roegen (1906-1994), who was among Daly's teachers at Vanderbilt University, provided ecological economics with a modern conceptual framework based on the material and energy flows of economic production and consumption. His magnum opus, The Entropy Law and the Economic Process (1971), has been highly influential.[5]

Green Economics is a more recent development that goes beyond the traditional scope of Ecological Economics but shares some of its basic principles. Green Economics comprises all aspects and sub-disciplines of economics, not only ecology related, and analyses economic issues with a pluralistic, holistic and long term view. The aim of this emerging discipline is the reform of mainstream economics towards an unbiased understanding of economic facts and the political choices available to enhance the economic freedom available to all stakeholders. Comprehensive academic work in this field is organised and co-ordinated by the Green Economics Institute, an academic think tank founded in 2004 in the UK, which edits the International Journal of Green Economics. See links below to the Institute and the journal publisher. The term Green Economics is in addition employed by UK based individuals acting as a political lobby and activist forum rather than taking the purely academic approach dominant amongst other ecological economists.

Articles by Inge Ropke (2004, 2005)[6] and Clive Spash (1999)[7] cover the development and modern history of ecological economics and explain its differentiation from resource and environmental economics, as well as some of the controversy between American and European schools of thought.

[edit] Topics in ecological economics

[edit] Concept

The primary objective of ecological economics (EE) is to ground economic thinking and practice in physical reality, especially in the laws of physics (particularly the laws of thermodynamics) and in knowledge of biological systems. It accepts as a goal the improvement of human well-being through development, and seeks to ensure achievement of this through planning for the sustainable development of ecosystems and societies. Of course the terms development and sustainable development are far from lacking controversy. Richard Norgaard explains how traditional economics has hi-jacked the development terminology in his book Development Betrayed.[8] Well-being in ecological economics is also differentiated from welfare as found in mainstream economics and the 'new welfare economics' from the 1930s which informs resource and environmental economics. This entails a limited preference utilitarian conception of value i.e., Nature is valuable to our economies, that is because people will pay for its services such as clean air, clean water, encounters with wilderness, etc.

Ecological economics distinguishes itself from neoclassical economics primarily by its assertion that the economy is an embedded within an environmental system. Ecology deals with the energy and matter transactions of life and the Earth, and the human economy is by definition contained within this system. In contrast, neoclassical economics has historically ignored the environment at best relegating it to be a subset of the human economy. Economic theory, as encapsulated in general equilibrium models, then assume both an infinite resource base and also infinite waste sinks with no feedbacks. That is resource never run out and pollution never occurs. This allows neoclassical economics to claim theoretically that infinite economic growth is both possible and desirable.

However, this belief disagrees with much of what the natural sciences have learned about the world, and, according to Ecological Economics, completely ignores the contributions of Nature to the creation of wealth e.g., the planetary endowment of scarce matter and energy, along with the complex and biologically diverse ecosystems that provide goods and ecosystem services directly to human communities: micro- and macro-climate regulation, water recycling, water purification, storm water regulation, waste absorption, food and medicine production, pollination, protection from solar and cosmic radiation, the view of a starry night sky, etc.

There has then been a move to regard such things as natural capital and ecosystems functions as goods and services. [9][10] However, this is far from uncontroversial within ecology or ecological economics due to the potential for narrowing down values to those found in mainstream economics and the danger of merely regarding Nature as a commodity. This has been refereed to as ecologists 'selling out on Nature'.[11] There is then a concern that ecological economics has failed to learn from the extensive literature in environmental ethics about how to structure a plural value system.

[edit] Allocation of resources

Neoclassical economics focuses primarily on the efficient allocation of resources, and less on two other fundamental economic problems which are central to ecological economics: distribution (equity) and the scale of the economy relative to the ecosystems upon which it is reliant.[12] Ecological Economics also makes a clear distinction between growth (quantitative) and development (qualitative improvement of the quality of life) while arguing that Neoclassical economics confuses the two. Ecological Economics challenges the common normative approach taken towards natural resources, claiming that it misvalues Nature by displaying it as interchangeable with human capital--labor and technology. EE counters this convention by asserting that human capital is instead complementary to and dependent upon natural systems, as human capital inevitably derives from natural systems. From these premises, it follows that economic policy has a fiduciary responsibility to the greater ecological world, and that, by misvaluing the importance of Nature, sustainable progress (as opposed to economic growth) --which is the only solution to elevating the standard of living for citizens worldwide--will not result. Furthermore, ecological economists point out that, beyond modest levels, increased per-capita consumption (the typical economic measure of "standard of living") does not necessarily lead to improvements in human wellbeing, while this same consumption can have harmful effects on the environment and broader societal wellbeing.

[edit] Energy economics

It rejects the view of energy economics that growth in the energy supply is related directly to well being, focusing instead on biodiversity and creativity - or natural capital and individual capital, in the terminology sometimes adopted to describe these economically. In practice, ecological economics focuses primarily on the key issues of uneconomic growth and quality of life. Ecological economists are inclined to acknowledge that much of what is important in human well-being is not analyzable from a strictly economic standpoint and suggests an interdisciplinary approach combining social and natural sciences as a means to address this.

[edit] Environmental services

A study was carried out by Costanza and colleagues[13] to determine the 'price' of the services provided by the environment. This was determined by averaging values obtained from a range of studies conducted in very specific context and then transferring these without regard to that context. Dollar figures were averaged to a per hectare number for different types of ecosystem e.g. wetlands, oceans. A total was then produced which came out at 33 trillion US dollars (1997 values), more than twice the total GDP of the world at the time of the study However, the study has been heavily criticized by both mainstream environmental economists - for being inconsistent with assumptions of monetary valuation - and ecological economists - for being inconsistent with an ecological economics focus on biological and physical indicators.[14]. The whole idea of treating ecosystems as goods and services to be valued in monetary terms remains highly controversial, although many ecologists and conservation biologist are pursuing the idea. See also ecosystem valuation.

[edit] Externalities

Ecological economics is founded upon the view that the NCE assumption that environmental and community costs and benefits are mutually canceling "externalities" is not warranted. Juan Martinez Alier [15], for instance shows that the bulk of consumers are automatically excluded from having an impact upon the prices of commodities, as these consumers are future generations who have not been born yet. The assumptions behind future discounting, which assume that future goods will be cheaper than present goods, has been criticised by Fred Pearce[16] and by the recent Stern Report. Although the Stern report itself does employ discounting and has been criticised by ecological economists.[17] Concerning these externalities, Paul Hawken argues that the only reason why goods produced unsustainably are usually cheaper than goods produced sustainably is due to a hidden subsidy, paid by the non monetarised human environment, community or future generations[18]. These arguments are developed further by Hawken, Amory and Hunter Lovins in "Natural Capitalism: Creating the Next Industrial Revolution"[19].

[edit] See also

Sustainable development Portal


[edit] References

  1. ^ Kapp, K. W. (1950) The Social Costs of Private Enterprise. New York: Shocken.
  2. ^ Polanyi, K. (1944) The Great Transformation. New York/Toronto: Rinehart & Company Inc.
  3. ^ Schumacher, E.F. 1973. Small Is Beautiful: A Study of Economics as if People Mattered. London: Blond and Briggs.
  4. ^ Daly, H. 1991. Steady-State Economics (2nd ed.). Washington, D.C.: Island Press.
  5. ^ Georgescu-Roegen, N. 1971. The Entropy Law and the Economic Process. Cambridge, Mass.: Harvard University Press.
  6. ^ Røpke, I. (2004) The early history of modern ecological economics. Ecological Economics 50(3-4): 293-314. Røpke, I. (2005) Trends in the development of ecological economics from the late 1980s to the early 2000s. Ecological Economics 55(2): 262-290.
  7. ^ Spash, C. L. (1999) The development of environmental thinking in economics. Environmental Values 8(4): 413-435.
  8. ^ Norgaard, R. B. (1994) Development Betrayed: The End of Progress and a Coevolutionary Revisioning of the Future. London: Routledge
  9. ^ Daily, G.C. 1997. Nature's Services: Societal Dependence on Natural Ecosystems. Washington, D.C.: Island Press.
  10. ^ Millennium Ecosystem Assessment. 2005. Ecosystems and Human Well-Being: Biodiversity Synthesis. Washington, D.C.: World Resources Institute.
  11. ^ McCauley, D. J. (2006) Selling out on nature. Nature 443(7): 27-28
  12. ^ Daly, H. and Farley, J. 2004. Ecological Economics: Principles and Applications. Washington: Island Press.
  13. ^ Costanza, R., d'Arge, R., de Groot, R., Farber, S., Grasso, M., Hannon, B., Naeem, S., Limburg, K., Paruelo, J., O'Neill, R.V., Raskin, R., Sutton, P., and van den Belt, M. 1997. The value of the world's ecosystem services and natural capital. Nature 387: 253-260.
  14. ^ Norgaard, R.B. and Bode, C. 1998. Next, the value of God, and other reactions. Ecological Economics 25: 37-39.
  15. ^ Jose Maria Figueres Olson (Foreword), Robert Costanza (Editor), Olman Segura (Editor), Juan Martinez-Alier (Editor), Juan Martinez Alier (Author) (1996) "Getting Down to Earth: Practical Applications Of Ecological Economics" (Intl Society for Ecological Economics) (Island Press)
  16. ^ Pearce, Fred "Blueprint for a Greener Economy"
  17. ^ Spash, C. L. (2007) The economics of climate change impacts à la Stern: Novel and nuanced or rhetorically restricted? Ecological Economics 63(4): 706-713
  18. ^ Hawken, Paul (1994) "The Ecology of Commerce" (Collins)
  19. ^ Hawken, Paul; Amory and Hunter Lovins (2000) "Natural Capitalism: Creating the Next Industrial Revolution" (Back Bay Books)

[edit] Further reading

  • Common, M. and Stagl, S. 2005. Ecological Economics: An Introduction. New York: Cambridge University Press.
  • Daly, H. and Townsend, K. (eds.) 1993. Valuing The Earth: Economics, Ecology, Ethics. Cambridge, Mass.; London, England: MIT Press.
  • Georgescu-Roegen, N. 1975. Energy and economic myths. Southern Economic Journal 41: 347-381.
  • Martinez-Alier, J. (1990) Ecological Economics: Energy, Environment and Society. Oxford, England: Basil Blackwell.
  • Røpke, I. (2004) The early history of modern ecological economics. Ecological Economics 50(3-4): 293-314.
  • Røpke, I. (2005) Trends in the development of ecological economics from the late 1980s to the early 2000s. Ecological Economics 55(2): 262-290.
  • Spash, C. L. (1999) The development of environmental thinking in economics. Environmental Values 8(4): 413-435.
  • Vatn, A. (2005) Institutions and the Environment. Cheltenham: Edward Elgar

[edit] External links